Law Firms Pay $5M for Stanford Ponzi

DALLAS (CN) – Two Louisiana law firms will pay $5 million to settle claims they referred clients to R. Allen Stanford’s $7 billion Ponzi scheme and gave fake opinions to Antiguan banking authorities. A proposed class of Stanford investors sued New Orleans-based Adams & Reese, Baton Rouge-based Breazeale Sachse & Wilson and several individuals in Federal Court in 2011. Court-appointed receiver Ralph Janvey filed a second suit in 2012, accusing the defendants of negligence, breach of fiduciary duty, aiding and abetting. Janvey also sued Adams & Reese attorneys Robert Schmidt and James Austin, Breazeale Sachse & Wilson attorney Claude Reynaud and Stanford Trust Co. directors Cordell Haymon and Thomas Frazier. Janvey said the defendant law firms “embarked on their own campaign to enrich themselves at their other clients’ expense,” and that while providing legal services to Stanford Financial, they referred their own clients to Stanford . The law firms and Janvey settled the bulk of the claims Tuesday in a stipulation and proposed order. Adams & Reese will pay the receivership $1 million and Breazeale Sachse & Wilson will pay $1.53 million and release $198,000 held in escrow, according to a 40-page motion to approve the proposed settlement . Haymon will pay the receivership $2 million and Frazier will pay $175,000. “Movants jointly request that this court find the settlements are in the best interest of the Stanford Estate and the Stanford investors, and approve the settlements,” the motion states. Adams & Reese will be dismissed from Janvey’s lawsuit, with Breazeale Sachse & Wilson remaining only on a claim of vicarious liability. The settling defendants still “vigorously dispute” the claims in both lawsuits, but say the settlement is “a fair and reasonable compromise” given the “uncertainties inherent in litigation” and issues with collectability. Janvey claimed in his lawsuit that Renaud and Breazeale Sachse & Wilson were brought in to help with Stanford’s purchase of Southern Trust Co., a Baton Rouge-based trust company, which established the investment retirement account component of the Ponzi scheme. He alleged Renaud and BSW delivered a letter, purportedly from Antigua’s Minister of Finance, to Louisiana state authorities that attested to the “integrity” and “professional competence” of SIBL’s operations. In reality, this letter was actually written by Stanford Financial – most likely [Stanford Financial general counsel Yolanda] Suarez or one of her staff – and Reynaud knew this letter was actually written by Stanford Financial because Suarez provided him with a draft copy of the letter when Reynaud met with Suarez on June 4, 1998, before it was purportedly signed by Antigua’s Minister of Finance,” the complaint stated. Janvey said the fake letter worked, as the state’s Office of Financial Institutions conditionally approved the acquisition, which was closed by BSW in July of 1998. The company’s name then was changed to Stanford Trust Company. Two months later, Stanford Trust Co. (STC) opened its doors and Stanford Financial began implementing its fraudulent IRA plan by promoting STC as a trustee and custodian for Stanford Group Company’s IRA investor clients, the complaint stated. Janvey claimed STC and its parent company executed reciprocal referral agreements that gave both companies incentives to “recklessly promote” STC so the parent company’s IRA clients could invest their retirement funds in SIBL CDs. The complaint accuses Renaud of knowing about Stanford’s failure to obtain security for its fictitious investments, which is a breach of fiduciary duty to IRA accountholders. Janvey’s attorney, Kevin Sadler with Baker Botts in Palo Alto, said Janvey is “pleased” with the settlement. “This case is but one of more than 50 that the receiver has pursued to recover funds for the benefit of the victims of the Stanford Ponzi scheme,” Sadler said Wednesday in an email. “This settlement is in the best interests of those victims. The receiver will continue to prosecute his cases against other defendants who benefited from the Stanford Ponzi scheme.”